Authors

Abstract

Structure of organizations tends to affect the complexity of their behavior during the process of organizational transformation. As a result, organizations that are more complex structurally tend to transform in the environment that is more conflict-prone. We suggest that by affecting the structure of an organization during the process of organizational transformation, its behavior and conflict environment can be controlled. This paper examines the process of organizational transformation from the perspective of the complex systems theory and chaos theory. It offers insights and implications that could lead to better strategies for managing a conflict environment of organizations.

Introduction

The purpose of this paper is to inquire into the nature and sources of an organizational conflict associated with and brought about by the structural complexity of organizations during the process of organizational transformation. For the purposes of this inquiry, we define organizational transformation as any purposeful change associated with the goal-driven alteration of the behavior or a structure of an organization. There are multiple reasons for conflicts, some of them are generic, and some are specific to a given setting. We suggest the existence of two types of risk factors associated with organizational conflicts. The first type refers to contextual risk factors, which are specific to a given setting and are unique to each organization. As a result, they are difficult to identify in advance. The second type refers to inherent risk factors that are common to all organizations. These inherent risk factors could be and should be foreseen and anticipated during the period of organizational transformation. We suggest that one of the inherent risk factors is associated with the complexity of the structure of an organization, and intend to demonstrate that, under specific circumstances, the structural complexity of a system can give rise to a chaotic behavior, associated with the loss of control and creation of the conflict-prone environment. In this study, we rely on the assumption that the presence of control over the behavior of an organization is associated with an order and absence of a conflict, while chaos is associated with the absence of control and presence of a conflict. The link between the complexity of the structure and complexity of the behavior justifies our second assumption that complex organizational structures are more conflict-prone then the less complex structures.

Our investigation does not deal with the issues of a conflict resolution directly; rather we inquire into the issue of the management of the environment for the purposes of conflict resolution. The reasons why organizational conflicts may come to existence are many, but in this paper, we concentrate on a single factor, namely a complexity of the structure and behavior of an organization. Consequently, the unit of analysis in our study is an organization, and the focus of the study is a complexity of the behavior of an organization.

We outline the general research problem addressed in this paper as follows: What are some of the means that can allow for management of the complexity of the behavior of an organization? To answer our research question we adapt a two-phase approach. First, we argue that Chaos Theory (CT) can provide a solid theoretical foundation for researching the behavior of organizations. We premise this argument on the basis that an organization can be perceived as a complex non-linear dynamic system with a pattern of behavior that falls under the purview of CT. Previously, applicability of CT to the study of social systems have been successfully argued for by Dhillon and Ward (2002), Tsoukas (1998), and McDaniel and Walls (1997). Second, we argue that Complex System Theory (CST) can provide important insights regarding the management of the complexity of the behavior of organizations. The gist of the argument is that complex systems (CS) exhibit self-organizing behavior that can be indirectly manipulated through the management of interdependencies between the system’s components. Axley and McMahon (2006), Campbell-Hunt (2007) and Tsoukas (1998) have successfully argued the importance of the issues of complexity and applicability of Complexity sciences to the study of organizations.

While an overall focus of our inquiry is in line with the established stream of research relating CT and CST to organizational contexts (Harvey & Reed, 1996; Ketterer, 2006; Morcol, 1996), the incorporation of CT and CST into a single perspective is novel. We formulate the research question of this study as follows: What insights can CT offer regarding the behavior of an organization, and what insights can CST provide regarding the management of that behavior? The justification of our approach is intuitive, for a theoretical foundation can offer a generalized perspective on a context-dependent subject. The reason for using two theoretical perspectives on CS is quite simple also: while CT provides us with insights regarding the behavior of a CS, it does not deal with the management of that behavior. Consequently, we use CST to get insights regarding the ways by which the behavior of a CS can be managed. To substantiate the arguments, the paper proceeds as a sequence of five parts. The “Theoretical Framework” section presents an overview of the characteristics of non-linear dynamic systems and of the major tenets of CT; it also offers two CT-based propositions relevant to the process of organizational transformation. “Managing Chaos: Implications for Organizational Transformation” develops some of the implications of the insights that are relevant to the process of organizational transformation. “Organization and Organizational Change from the Perspective of CST” proposes a set of CST-based insights that allow for managing complexity of the behavior of organizations. Brief conclusions follow.

Theoretical Framework

CST and CT form the theoretical foundation of this study. The major premise of our investigation posits that an organization is a complex non-linear dynamic system behavior of which can become chaotic, but can also be managed by manipulation of interdependencies between the system’s components. We start by providing a necessarily brief overview of basic characteristics of complex non-linear dynamic systems.

A system is complex if it consists of a large number of interacting components (Simon, 1962). The interactions between the components of a CS are associated with the presence of a feedback mechanism, which, due to the non-linearity of the feedback-controlled interactions, makes a CS non-linear and causes CS to exhibit emergent properties, which refer to the appearance of independently observable and empirically verifiable patterns of the collective behavior of the system (Morel and Ramanujam, 1999). CS is dynamic if its state or behavior changes with time. Finally, a CS is deterministic in terms of the cause and effect if the variables describing it relate to each other in a non-probabilistic way.

Subject of study of CT is a large class of CS capable of exhibiting chaotic pattern of behavior. We define CT as a qualitative study of unstable aperiodic behavior in deterministic non-linear dynamical systems (Kellert, 1993). Behavior of a system can be represented in terms of an attractor, or a “set of points in the phase space of a dynamical feedback system that defines its steady state motion” (Radzicki, 1990). Every attractor has a basin of attraction, or a set of points in the space of system variables that evolve to a particular attractor. Aperiodically fluctuating systems are said to have a strange attractor. Strange attractors are chaotic when the trajectories in the phase space, from two points very close on the attractor, diverge exponentially due to the system’s sensitive dependence on initial conditions and small perturbations in control parameters. According to CT, CS might have multiple attractors associated with multiple patterns of behavior, and transition from a semi-stable to a chaotic state. This happens when a value of a key parameter of a system increases and exceeds a threshold value, forcing a single outcome basin to expand into two distinct causal fields. This process of bifurcation can safely continue up to the point of a system having eight basins of attraction. However, the next bifurcation marks the onset of chaos (Feigenbaum, 1978).

Our intent to inquire into the behavior of an organization through the lens of CT is not original. Dooley and Van de Ven (1999) state that an increasing interest of organizational scholars focused “on the notion that at times an organization may be viewed as behaving chaotically,” as well as on the “implications of chaos-that the system is deterministic and hypersensitive to small perturbations.” We direct the interested reader to the works of Jayanthi and Sinha (1998), Dooley, et al. (1995), Stacey (1992), and Thietart and Forgues (1995). From the perspective of CT, organizational transformation can be viewed as the process of matching the actual state of an organization with the intended one by means of manipulating the behavior of the existing organization. In terms of CT, the process of transformation is concerned with a transformation of the current system’s state to a new dynamical state (Young & Kiel, 1994). We know that when a system goes through the process of consecutive bifurcations the number of its natural outcomes, or states, changes. However, internal structural parameters of the system stay the same. Consequently, in a pre-chaotic region the same internal configuration of the system might produce up to eight different outcomes. However, as the system enters a state of chaos, new windows of order appear; this represents the emergence of entirely new organizational forms (Young & Kiel, 1994).

The implications are obvious; if we desire an entirely different form of an organization, then the process of organizational transformation must go through the chaotic stage, which makes the organizational environment more susceptible to conflicts. For the purposes of this paper, we define conflict as an emergent, detrimental to organizational purposes social interaction that is associated with and triggered by the process of the organizational transformation. This leads us to Proposition 1: The process of organizational transformation aiming to obtain a qualitatively new form of an organization will take place in a conflict-prone environment. Conversely, if the goal of the transformation is to change the behavior of an organization while preserving the existing structure, then the process of transformation does not have to have a chaotic part, which makes the organizational environment less susceptible to conflicts. This leads us to Proposition 2: The process of organizational transformation aiming to change the organizational behavior, while preserving the existing structure, does not have to take place in conflict-prone environment. It is important to note, that even if in the context of the real world, the process described in Proposition 2 could become chaotic, according to CT this process does not have to become chaotic, while the process described in Proposition 1 does. Next, we attempt to determine the ways of managing the behavior of an organization that is about to enter, has entered, or emerges from the chaotic state.

Managing Chaos: Implications for Organizational Transformation

Three requirements are essential for managing the behavior of a chaotic system: (1) Understanding of non-linearity, (2) Appreciation of the sensitivity of the system to its initial conditions, and (3) Understanding of a non-average behavior as a source of change (Kiel, 1997). Concerning the first requirement, Senge (1990) and Holland (1995) argue that it is of great importance to find the leverages (Senge, 1990) or lever points (Holland, 1995) of the system that could be subject to butterfly effect. Once these leverages are found, even a “small targeted change may produce larger scale results compared to comprehensive change efforts that may squelch an organization’s or social system’s capacity for adaptive response” (Kiel, 1997). And while Holland (1995) acknowledges that its is not a trivial task to find the system’s leverage points, Kiel (1997) responds that the best approach is to use multiple possible leverages and hope that at least some of them will work. The second requirement, a system’s sensitivity to initial conditions, raises concerns regarding the effectiveness of the commonly utilized practices of benchmarking and the transfer of best practices. According to CT, we cannot expect the same intervention to produce the same effect in two different systems, and the suggestion of Kiel (1997) that “managers identify the elements unique to their environments prior to the implementation of another jurisdiction’s best practice” seems to be well warranted. The last requirement refers to the appreciation for a non-average (Prigogine & Stengers, 1984), unusual event that “pushes the boundaries of existing structures and processes and leads the way for new forms of organizational response and evolution after bifurcating events” (Kiel, 1997). Such an event will most likely manifest itself in the form of an outlier, produced by a CS with the pattern of the behavior that is “neither normally distributed nor regular” (Parker & Stacey, 1994). Consequently, we propose the following Implication 1: The process of organizational transformation that aims to result in a qualitatively new form of an organization should start from identifying the organization’s unique characteristics, and then proceed by means of small targeted changes, while being guided by non-average events. Clearly, all the possible means of control are organization-specific.

The next implication that we develop is pertinent to the management of the behavior of a system that approaches the edge of chaos. The managing of the behavior of such system is a process of controlled increase of the induced into the system gradual chaos. There are three ways to control chaos: first, by altering the system’s parameters in order to reduce uncertainty and increase predictability, second, by the application of small perturbations to the chaotic system to try to cause it to organize, and third, by changing the relationship between the system and its environment (Kiel, 1995). Consequently, we offer Implication 2: The process of organizational transformation that aims to result in the change of the behavior of the existing organization could prevent entry of the system into chaotic region by either altering the internal parameters of the system, or by altering system’s relationships with the environment, or by applying small perturbations to the system. Let us consider the importance of the developed insights and implications to the process of management of organizational transformation. According to Implication 1, we cannot adequately prepare in advance to control the conflict environment during the process of organizational transformation once it becomes chaotic. However, can we control the behavior of a system that approaches the edge of chaos or emerges from the chaotic region? Let us consider a way of controlling chaos through the application of small perturbations (i.e., reassigning workers from one team to another, changing the structure of the workday, etc.). The important point is that by applying small perturbations to the system we hope that small changes in some of the system’s parameters could trigger the consequent series of changes affecting the system’s organization. Therefore, it is rather an indirect way of controlling the organizational environment. Let us consider the way of controlling chaos by means of changing the relationship between the system and the environment. This requires continuous tracking of the relationship between critical conditions in the environment and key organizational parameters, followed by the adjustment of the system’s parameters in a continuous feedback process. This is also problematic, because it will require the scope of the process of transformation to expand and include critical conditions of the environment. We argue, that the complexity of the process of organizational transformation can be controlled by means of altering the internal parameters of the system. The purpose of the next section of the paper is to clarify what might constitute such a change in the context of an organization.

Organization and Organizational Change from the Perspective of CST

The concept of an organization as a CS is deeply rooted in the organizational theory (Katz & Kahn, 1966; Ashby 1968) and by now is well-established (Carley, 1995; Stacey, 1996; Thietart & Forgues, 1995). Research in the area of CS produced multiple important insights (Anderson, 1999), such as that CS tend to exhibit a pattern of self-organization (Fontana & Ballati, 1999) causing CS to evolve within its environment toward order (Kaufmann, 1993). Morel and Ramanujam (1999) describe self-organization as a process of spontaneous creation of complex structure that emerges due to the dynamics of the complex system. Our choice of self-organizing aspects of the behavior of complex systems is not incidental, for it is one of the dominant research paradigms in the area of CS (Morel & Ramanujam, 1999). Self-organization is a natural response of a CS to the constraints of its environment, which takes place naturally and automatically, and bears the purpose of increasing the level of fitness of the system, i.e., its efficiency and effectiveness. Modern organizations exist within hypercompetitive environments (D’ Aveni, 1994; Illinitch, et al., 1998), where the speed of self-organization becomes a strategic issue of being able to advance faster than competitors do (Brown & Eisenhardt, 1998).

Wright (1932) has originally introduced the concept of fitness landscapes in biology. Simplistically, this is an idea of mapping a structure of the system to its level of fitness. Kaufmann (1993) extended works of Wright and introduced the concept of ruggedness as a characteristic of a fitness landscape. According to Kaufmann, two variables, N, the number of system components, and K, the number of interconnections between N components, can characterize the system’s fitness landscape. One of the points of Kaufmann’s theory is that the increase in K gives rise to the rugged landscapes containing multiple fitness peaks and valleys, proliferation of which prevents the system from ever adapting to its optimal level. Kaufmann calls such detrimental increases in the number of system’s interconnections a complexity catastrophe, where a system is caught in multiple suboptimal fitness peaks. According to Kaufmann, the optimal evolution of a CS takes place between the edge of catastrophe and the edge of chaos. In other words, the system must be complex enough to evolve, but not too complex to be uncontrollable. Resultantly, systems that are too stable or too chaotic to adapt seem to be the most vulnerable; this implies that in order to evolve and survive, organizations must be adaptive enough to allow for presence of conflicts, but not too adaptable to allow for conflicts that could not be resolved due to the lack of control.

Levinthal and Warglien (1999) suggested that the “concept of a fitness landscape has rather natural analogues in the domain of social and economic phenomena” and applied Kaufmann’s (1993) ideas of fitness landscapes to the domain of organizations. They proposed that because the process of self-organization is context-dependent, the dynamics of the process could be influenced through the manipulation of the context. This approach, similar in spirit to that of Simon (1962) and Thompson (1967), relies on the varying of the density of the interdependencies of the system that affect the ruggedness or smoothness of the system’s fitness landscape, which, in turn, gives rise to a variety of different patterns of a system’s behavior. It turned out that the settings with low interdependencies produce structure-to-fitness mappings with the main features of single-peak landscapes, which are indicative of highly predictable dynamics of each individual component of the system. Such low-interdependence systems generate settings where local actions promote global improvement of the system, and even “a step in wrong direction …will involve only a minor degradation of global performance” (Levinthal & Warglien, 1999). The authors call such type of landscape design robust and suggest its importance for organizations where “continuous improvement policies are sought.” On the other hand, an increase in interdependencies between the system’s components eventually results in the rugged, multi-peaked landscapes. While this automatically brings along the problem of coordination, it also “encourages non-incremental search and exploration” that are “necessary when ‘breakthrough’ and ‘platform’ innovations” are desired during the new product development (Levinthal & Warglien, 1999). Relevance of the described above study to the process of organizational transformation becomes clear when the authors state, that the process of “[manipulating] distance, social and geographic, among actors can serve to tune interdependencies” in such manner, that by “reducing distances, via technology or other means, one increases the apparent ruggedness of the landscape.” In modern organizations, Information Systems (IS) provide the means by which multiple organizational components communicate with each other. The implication of this perspective is that an IS becomes the medium that controls the density of interrelationships K between the N components of an organization that undergoes the process of transformation. Naturally, an increase in the number of interdependencies would contribute to the increase in complexity of organizational transformation, while a decrease will contribute to the reduction of complexity.

We argue that communication channels provided by an IS could be used to influence the level of fitness of an organization and the complexity of the process of organizational transformation. In the context of this investigation, we define communication channel as an authorized and mediated by the organizational IS line of communication between two or more organizational agents. This is how, from a theoretical standpoint, we can manage a conflict environment of an organization. From the perspective of the paradigm of self-organization of CST, we can introduce a term Organizational Conflict Fitness, which we define as a structural capability of an organization to increase or maintain its level of performance in the conflict-controlled environment. While determination of what constitutes a level of performance of an organization is context-dependent, organizational conflict fitness is clearly associated with the capability to control the level of the structural complexity of an organization. At this point, we offer the following solution to the research question of this study: Based on insights offered by CT and CST, the behavior of an organization during the process of organizational transformation can range from order to chaos and can be managed by manipulation of interdependencies between the system’s components.

Fitness Landscapes and Organizations

The intent of this part of the paper is to illustrate how insights provided by the concept of Fitness Landscapes (Kaufmann, 1993) can be used to manage the conflict environment of an organization during the process of organizational transformation. First, let us discuss what “order” and “chaos” may mean in a real-life context. While it is possible to describe an organization by some sort of equation, or to identify formally when its behavior becomes chaotic, we doubt that practitioners require such degree of precision. Instead, we suggest a less formal, based on a perception of control, approach in evaluating the behavior of an organization. Consequently, instead of using and being guided by such formal terms as order, edge of chaos, and chaos, practitioners of the field may find it more beneficial to operate in terms of, respectively, perception of control, perception of the loss of control, and perception of the lost control over the behavior of an organization. Nevertheless, all insights and implications developed in this paper still apply; for our goal was to find a way of managing complexity of the behavior of an organization, rather than to identify precisely at what point its behavior becomes chaotic.

Keeping in mind the concept of Fitness Landscapes, we suggest that communication channels used during the process of organizational transformation may proliferate and lead to the increase of the ruggedness of the system’s landscape, as long as perception of control exists. Once the perception of the loss of control appears, the number of communication channels can increase further; this shall lead the system into the chaotic region characterized by the perception of the lost control. Conversely, a number of communication channels can be reduced to prevent the system from entering a chaotic region; this shall bring the behavior of the system back in the state of order, as determined by the perception of control. Based on the insights that we obtained in our study, we can offer the following response to the broad research question stated in Introduction: The complexity of the process of organizational transformation can be managed better if augmented by the capability of managing the communication channels of an organization.

Conclusion

This purpose of this study was to inquire into ways by which the conflict environment of an organization during the process of organizational transformation can be managed. Results of the investigation suggest that by varying the number of open communication channels we can control the complexity of a system’s structure and, consequently, manage its conflict environment. We would like to summarize some of the contributions of our study. From a theoretical standpoint, our inquiry demonstrated that such context-dependent undertaking as a process of organizational transformation could be approached in an objective, context-independent way if perceived from vantage points of CT and CST. Thus, regardless of the setting, we are able to foresee a general pattern of the behavior of the process, as well as to offer a theoretically sound way of managing it. Consequently, the main theoretical contribution of the paper is that based on the insights provided by CT and CST we outlined a general framework that allows managing a conflict environment of an organization during the process of organizational transformation.

We suggest that our research carries some value for practitioners as well. Conclusions of our study not only allow managers to prepare in advance for the expected increase in the complexity of the behavior of the process of organizational transformation, but also provide some practical suggestions regarding the management of the conflict environment. Consequently, the main practical contribution of the paper is that based on the insights provided by CT and CST, manipulation of communication channels allows for managing of the conflict environment of an organization during the process of organizational transformation.

Our research is not without its limitations. First, our study does not allow accounting for setting-specific factors that often are the main reason for organizational conflicts. Second, the insights and implications obtained in this study are yet to be tested in the real-world setting. Nevertheless, we hope that the contributions of our study outweigh its shortcomings.

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